Explain the following. A company estimates that an average-risk project has a cost of capital of 8 percent, a below-average risk project has a cost of capital of 6 percent, and an above-average risk project has a cost of capital of 10 percent. Which of the following independent projects should the company accept? Project A has below-average risk and a return of 6.5 percent. Project B has above-average risk and a return of 9 percent. Project C has average risk and a return of 7 percent.© BrainMass Inc. brainmass.com June 4, 2020, 2:34 am ad1c9bdddf
One must accept that project in which Return is more than cost of capital.
Hence let us discuss each project:
This solution discusses project analysis based on risk. It helps find which independent project a company should accept. The estimated risks for each of the projects are given.